Saturday, 31 October 2015

Here is a guide to business economics in the Great Lakes region, in the form of an index for my blog in 2015. It is arranged by topic and divided into blog entries ordered by the date they were posted. If you would like to see it in a different language, please visit Google Translate and type http://greatlakeseconomics.blogspot.co.uk in the translation box.

Tuesday, 27 October 2015

There's an detailed report of a small manufacturer in Burundi here and in English here. The report talks to the company's founder, a buyer, and an investment adviser.

The company says that sells its products (sticks of chalk for schools) more cheaply than Chinese or Kenyan imports. It buys the raw material from these countries, and adds value in the preparation of the end product. As other developing countries become richer and specialise in production of higher value goods, their manufacturing of lower value goods is likely to become less competitive in the Great Lakes region (as their wage bill rises, for example), opening the door for local producers to move into production.

Thursday, 22 October 2015

Burundi, the DRC, and Rwanda all have long-serving presidents, and much political debate in the countries relates to their hold on power and their struggles to retain their positions. Conventional economic debates on taxation and spending attract relatively less attention than in Western countries. The pressure put on the free media limits critical comparison of economic policies across different political parties.

One frequent argument in conventional political economy is over the level of taxation in the economy. The maximum rates of personal income taxation in each Great Lakes country are reported here (I haven't independently verified them). They are 35 percent in Burundi, 30 percent in the DRC, and 30 in Rwanda. The maximum rates of corporation tax are 35 percent in Burundi, 40 percent in the DRC, and 30 percent in Rwanda.

The taxation rates are not so different across the region. Rwanda has the lowest maximum taxation, with Burundi and the DRC having higher maximum rates. None are extreme by international standards. There's a debate to be had about the optimal rates of taxation, in a discussion of conventional political economy.

Monday, 19 October 2015

There's been another burst of inflation in the DRC, in the north western village of Zongo, opposite the Central African Republic's capital of Bangui. I wrote about inflationary hikes in the country in my last blog post.

Inflation is a rise in prices, often persistent. In Western countries, two frequent causes of major inflation are government operations to change the money supply, and changes in the price of natural commodities. Both of those also happen in the DRC, but the causes of the recent bursts in the country relate to the arrival of refugees from conflict in the CAR (who want to buy the same goods as the Congolese), and interruptions in transport (reducing the amount of goods to buy). A feature of these DRC-specific causes is not present in the causes in most Western countries (at least not totally present - government buying and selling of their own bonds is a bit similar). The feature is that they tend to end fully by themselves. Transport starts working again, refugees go home. So an inflationary "ripple" occurs, with a rise above trend, then a fall below trend, then restoration to the trend.

I don't know whether anyone has analysed inflationary ripples, but there is probably a lot of work that could be done there.

There are a number of ways to think about the issue from a business perspective. The sudden, large changes in prices make it more difficult for companies to plan, and increase risk. There are also implications for an efficient allocation of goods. When the central supplier first puts goods on a train, they don't know for sure what the prices will be when the goods are sold. There probably won't be a stable price over time. The distribution of goods across the DRC's territory is unlikely to be the best possible, from the point of view of maximising profits.

Industrial economists - who study markets that don't work perfectly - should be annoyed if the loss of profits for all companies combined is more than the cost of putting on more frequent trains (or mending roads). This might be the case if there is a problem with financing railways and roads, for example, or lack of information on company preferences.

Tuesday, 13 October 2015

A couple of major technological projects in Burundi and Rwanda caught my attention earlier this week.

In Burundi, a solar energy plant is to be constructed in Mubuga. Lack of electricity supply is a leading hindrance to business in the country, so the project could help companies nationally, as well as creating jobs around the plant itself. It looks like an enjoyable project to work for.

In Rwanda, there are plans to set up (reportedly) "the world's first drone airport". The airport is to be used for transporting medicines and electronic parts around the wider region. Again, it looks like a pleasant job, with plenty of mental challenges relating to construction and logistics.

Friday, 9 October 2015

It is almost two months since the Burundian government started its third term in power, and in that time it has undertaken various reforms of business policy in the country, or said that it plans to undertake them. They are a mixed bag: some are pro-market, while others are interventionist. The tone seems to lean to the former. The plans and policies include: